GAO’s Review of 7 States Medicaid Managed Care Oversight by the States – Lack of Oversight

The GAO is primarily after the recovery of federal funds but they point to a major problem in that there has been little CMS and states’ oversight of the Medicaid managed care expenditures, their focus is with the fee for service systems.  The GAO reports that the states admit to it because it is too complex to audit the MMCO.  Since we have heard about the difficulties in the per service rate settings in the home and community-based services and the problems with payments, this report is important for it supports the community based providers’ perspective that there is no oversight.


The GAO May 2014 report on their recent review of seven states’, including Florida, Medicaid managed care systems over a year period between 2013 and 2014 concludes that:

“State officials we spoke with told us that one reason they have not focused on managed care program integrity is that MCO plan and provider audits and investigations are more complex than those in the FFS model. Similarly, almost all of the state MFCU officials we spoke with told us that extra effort was required to obtain detailed managed care claims data. While most states have access to managed care encounter data, states must rely on MCO plans to provide actual dollar amounts of claims, which are needed to audit and investigate providers and determine the amounts of overpayments. Obtaining the data from each MCO could require significant time and effort, which may hamper audits and investigations, particularly in states with several MCO plans. For example, according to CMS, as of July 1, 2011, four of the seven states included in our review had 20 or more MCOs operating in their state.”

Conclusions:  “GAO identified a gap between state and federal efforts to ensure Medicaid managed care program integrity. Federal laws require the states and CMS to ensure the integrity of the Medicaid program, including payments under Medicaid managed care. However, most of the state PI units and MFCUs included in our review were not closely examining the activities of MCOs citing a lack of sufficient guidance and support. For example, CMS does not require states to audit the appropriateness of payments to MCOs to ensure payments have not been improperly inflated, nor does CMS require states to include review of payments to MCO providers as part of their Medicaid RAC programs. However, CMS has largely delegated managed care program integrity activities to the states. Without adequate federal support and guidance on ways to prevent or identify improper payments in a managed care setting, states are neither well-positioned to identify improper payments made to MCOs, nor are they able to ensure that MCOs are taking appropriate actions to identify, prevent, or discourage improper payments. Such efforts take on greater urgency as states that choose to expand their Medicaid programs under PPACA are likely to do so with managed care arrangements, receiving a 100 percent federal match for newly eligible individuals from 2014 through 2016. Unless CMS takes a larger role in holding states accountable, and provides guidance and support to states to ensure adequate program integrity efforts in Medicaid managed care, the gap between state and federal efforts to monitor managed care program integrity leaves a growing portion of federal Medicaid dollars vulnerable to improper payments.

What GAO Recommends

GAO recommends that CMS increase its oversight of program integrity efforts by requiring states to audit payments to and by MCOs; updating its guidance on Medicaid managed care program integrity; and providing states additional support for managed care oversight, such as audit assistance from existing contractors. In its comments, HHS asked for clarification on the first recommendation and concurred with the other two. In response, GAO clarified its first recommendation—that CMS take the added step of requiring states to audit the appropriateness of payments to and by MCOs to better ensure Medicaid program integrity.”